International-Business-Dr-R-Chandran-E-book

10. MERGERS AND ACQISITIONS
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International Business- Dr. R. Chandran
In this case the company in the host country selects a foreign company
merges itself with it. The foreign company acquires the control of
ownership. This mode of entry gives an outstanding competitive edge over
others. Such companies strengthen their international manufacturing
facilities and marketing network. Proctor & Gamble entered Mexico and
became leaders in five years by acquiring Loreto. Tata bearing acquired
Metal Box in India. It is an easy and fast method since the cost of acquisition
is comparatively low. At the same time the disadvantages are:
a. It is a complex task involving banks, lawyers, bureaucrats and
obviously politicians.
b. The host countries may impose restrictions on acquisitions.
c. The labour problem is a big challenge to acquisitions specially
in developing countries where unemployment is a critical issue.
The global STEEL-KING L.N.Mittal was successful right from the first
acquisition of steel mill in Indonesia. Many other acquisitions followed in
Trinidad, Kazakhstan, Hungary and others. The recent Aditya Birla Group
Company Hindalco acquisition of Novelis has strengthened its production
synergy and market access for non-ferrous category in the international
market.
11. TAKE-OVERS
This is a strategy whereby a company identifies a healthy unit with strong
brand name and network and brings it under the management of another unit
in order to become a leader in the field and guarantee success. Since there
may be many parties wanting to takeover a well-known company,
competition becomes inevitable. It is obvious that only one entity will win
and the winner has to withstand hostilities. Therefore, the process is called a
“hostile take over” and the winner is called the “take over tycoon”. Wellknown
examples are the Hindujas who took over Ashok Leyland and
Uniliver who took over Brook Bond and Lipton. Take-over is also on
different levels, such as company takeover, business takeover, product
takeover and brand takeover. Some takeovers in the past have made many
corporate success stories. For example, Uniliver’s take over of Brook Bond
and Lipton enhanced its position as a leader in the tea industry in India.
Always takeovers cost more as compared to acquisition but probability of
success is high.
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